”A Call From Britain To Team Up With Canada, Australia And New Zealand”

Posted on Posted in Australia, Canada, New Zealand, Review, UK
Why is the U.K. leaving the European Union? Because, although for many years the British were happy to have a close geopolitical alliance with like-minded countries of similar levels of economic development, building trade links, converging regulatory systems, and ever-closer collaboration, in the end the British did not have quite enough cultural and constitutional similarity with their partners to take the final steps towards political union. It also didn’t help that, towards the end, the alliance included countries of much lower income levels.

London Canary Wharf (photograph: Jason Hawkes)

If that is why the British are leaving, the natural question is: are there any countries out there with similar values and similar income levels with whom the British have greater cultural and constitutional similarity? That is obviously a question that answers itself: Canada, Australia and New Zealand are closer to Britain, constitutionally and culturally, than anywhere in Europe. And their income levels are fairly similar: in 2014, the U.K. had a GDP per capita of about US$46,000, versus US$44,000 for New Zealand, US$50,000 for Canada and Australia a little higher at US$62,000.

They are also the countries Britons like most, by a large margin. A 2011 survey by the research firm YouGov found that Australia, New Zealand and Canada are regarded as “especially favourable” by 48, 47 and 44 per cent of Britons. The next most-favoured country, the U.S., was way behind at 31 per cent, and the most-favoured EU member, the Netherlands, had only half the favourability of those three countries, at 24 per cent. The feeling is fairly mutual. A 2014 survey found 80 per cent of Canadians and 73 per cent of Australians regard the U.K.’s influence as “mainly positive.” (By way of reference, that same survey found only 43 per cent of Canadians regard American influence as “mainly positive,” versus 52 per cent who regard it as “mainly negative.”)

So some close geopolitical alliance between these “CANZUK” countries could obviously work in terms of culture, constitutions, income and mutual regard. But would it be worth it in other terms, such as trade or defence? Well, in brute terms these four countries would obviously constitute a big global player. Between them they would control a surface area of more than 18 million square kilometres, the largest in the world, exceeding even Russia’s 17 million. Their combined population, at 128 million, would be the world’s 10th largest, just ahead of Japan. Their combined military spending of around US$110 billion would be the world’s third largest, behind the U.S. and China but well ahead of Russia.

At US$6.5 trillion in combined GDP, the CANZUK countries would constitute the fourth-largest group in the world, behind the U.S., EU and China. At nearly two-thirds the combined GDP of China, no one could deny that a CANZUK economic grouping would be economically significant. Total global trade of these four countries would be worth more than US$3.5 trillion, versus around US$4.8 trillion for the U.S., US$4.2 trillion for China, or US$1.7 trillion for Japan. These are big numbers by global standards.

What might be the elements to a new partnership? The first step might be a new trade deal, perhaps encompassing all four countries together. Then we could add free movement of people — i.e., the automatic right to move to work. A special defence partnership might follow, perhaps including the U.K. providing a nuclear shield to Australia (more credible today than U.S. guarantees) and naval support to Canada to enforce its claims on the increasingly important Northwest Passage. We could develop mutual recognition of our economic, environmental and health and safety regulations, along with our labour standards. Perhaps we might agree to committees or other institutions to develop future regulation together.

Melbourne CBD (photograph: Kay Stewart)

It would be very important that Canada, Australia and New Zealand did not see this as some reheated latter-day British Empire. Hence, any CANZUK governance institutions (akin to the European Commission, the IMF or the Bank for International Settlements) should be located in a member country other than the U.K. In any event, the modern U.K. population of around 65 million is only a little greater than that of Canada and Australia combined. The risk of dominance through asymmetry of economic or population size would be small. This would be a partnership of equals.

The vast geographic range of a CANZUK union would obviously offer huge opportunities for influence and internal expansion, likely leading to population increases particularly in Canada and Australia. Some may worry that it would also present challenges of coherence and trade transport. But in modern economies, transport costs for goods are fairly cheap and most of the value of output lies in services. Tradable services can often be transferred over the Internet or via other modern communications. With other factors to bind countries and peoples together, geographic spread is an increasingly obsolete barrier.

A CANZUK alliance would allow its peoples to assert their very similar culture and values in the world as a major global player instead of secondary regional players ultimately subservient to others. It would allow enormous opportunities for mutual reinforcement and protection, trade growth, the flow of people and weight in global economic, regulatory and geopolitical decision-making. When CANZUK speaks, all would listen. Shall we try?

Dr. Andrew Lilico, based in London, is executive director and principal of Europe Economics, a fellow of the Institute of Economic Affairs, and chairman of the IEA/Sunday Times Monetary Policy Committee.

[Article published by the Financial Post]